Percentage of Cayman-based hedge funds declining

The percentage of hedge fund launches domiciled in the Cayman Islands has declined slightly in recent years, according to a report on key trends in hedge funds in 2015 by data provider Eurekahedge.

Cayman has seen its global share decrease from 26.7 percent for funds launched in 2010 to 25 percent for funds launched as of February 2016. In 2015, only 15 percent of new funds were domiciled in the Cayman Islands.

Meanwhile, the United States has grown its share from 33.8 percent for funds launched in 2010 to 58.3 percent for funds launched as of February 2016. In 2015, nearly half of all new funds (48.4 percent) were domiciled in the United States.

Both Luxembourg and Ireland also took a larger portion new fund launches, the data provider reported. Luxembourg increased its share as a domicile for new funds from 12.9 percent in 2010 to 16.7 percent in 2016, while Ireland doubled its domiciliation share from 7.3 percent in 2010 to 14.6 percent in 2015.

The United States, the Cayman Islands, Luxembourg and Ireland together account for 82 percent of the world’s hedge funds as of February 2016.

Hedge funds recover in March in line with markets

Hedge funds recovered some of their 2016 losses and gained 1.33 percent in March. Underlying equity markets such as the MSCI World Index jumped 5.47 percent as both the Federal Reserve’s decision to hold back on its scheduled interest rate hikes for this year and rising oil prices pushed markets higher.

Eurekahedge data shows that hedge funds ended the first quarter of the year down 0.37 percent, outperforming the MSCI World Index, which lost 1.97 percent.

Overall, the global hedge funds industry grew by US$108.7 billion in 2015 with investor inflows accounting for three-quarters of the gain in assets.

In the first quarter of this year, however, total assets under management declined by US$6.4 billion – the only first quarter decline in hedge fund assets on record since 2009.

Funds investing in emerging markets had a positive month supported by more stable oil and commodity prices. Latin American hedge funds were the best performers with gains of 4.85 percent in March and the only regional mandate with positive returns in 2016, of 6.15 percent, Eurekahedge reported.

Asian funds, excluding Japan, were up for the first time this year and jumped 4.78 percent during the month.

In contrast, European managers posted their third consecutive month of performance-based decline, totaling US$7.8 billion on a year-to-date basis, but also received the biggest investment inflows – US$8.1 billion – of all regions during the period.

In terms of investment strategies, event driven hedge funds posted the best returns among all strategic mandates in March, up 3.16 percent. And distressed debt hedge funds were up for the first time after a four-month losing streak, gaining 3.03 percent during the month.

“Market reversals did not bode well for some CTA/managed futures and macro managers with returns languishing into negative territory during the month as comments made by central bankers led to choppy trading conditions.

“Policy shots remain a key theme for central bankers as they attempt to jolt the global economy amid a deflationary environment,” the data provider said.